Newspaper article The Canadian Press

Canadian Policy-Makers Weigh Wide-Ranging Effects of Plunging Oil Prices

Newspaper article The Canadian Press

Canadian Policy-Makers Weigh Wide-Ranging Effects of Plunging Oil Prices

Article excerpt

Canada weighs impact of plunging oil prices

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WASHINGTON - Canadian policy-makers are trying to gauge the wide-ranging effect of plunging oil prices --whose impact on the national economy could be felt everywhere from the loonie, to imports and exports, government revenues and consumer spending.

The Bank of Canada says its monetary policy report in two weeks will attempt to measure the effect of oil prices, which are down nearly one-quarter since last year and which briefly dipped Friday below their lowest level in nearly four years.

Governor Stephen Poloz told a news conference at the global financial meetings in Washington that it's not easy to assess, given the need to weigh all the negative factors against the positives.

He noted that lower prices also mean higher disposable income for consumers, and said the bank's upcoming monetary report will attempt to assess all those variables.

Then there's the question of how long this trend will last.

"There's a question mark about whether it's a permanent decline, or not. That requires a judgment," Poloz told reporters. "It's not an easy analysis, because there's the consumers. Lower prices, perhaps. But that's higher incomes. The models are intended to work all that out. But it's very hard to do without a full general equilibrium assessment. So we'll save that for a couple of weeks."

A BMO bank analysis Friday concluded the trend could be particularly painful for oil-producing provinces, with Alberta seeing a three per cent dent in its provincial government revenue projections. The report titled, "Life With $85 Oil," concluded that the positives of cheap oil would be clearly outweighed by the negatives in the oil-producing provinces.

It noted that Alberta and Saskatchewan's governments had made their 2014-15 budget projections based on revenues from oil priced in the high 90s on the West Texas Intermediate benchmark, while Newfoundland had based its revenue projections on oil at $105 using the international Brent standard. …

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